Economic Theory

, Volume 50, Issue 3, pp 703–725

Patent policy, patent pools, and the accumulation of claims in sequential innovation

Research Article

DOI: 10.1007/s00199-010-0591-5

Cite this article as:
Llanes, G. & Trento, S. Econ Theory (2012) 50: 703. doi:10.1007/s00199-010-0591-5

Abstract

We present a dynamic model where the accumulation of patents generates an increasing number of claims on sequential innovation. We compare innovation activity under three regimes—patents, no-patents, and patent pools—and find that none of them can reach the first best. We find that the first best can be reached through a decentralized tax-subsidy mechanism, by which innovators receive a subsidy when they innovate, and are taxed with subsequent innovations. This finding implies that optimal transfers work in the exact opposite way as traditional patents. Finally, we consider patents of finite duration and determine the optimal patent length.

Keywords

Sequential innovation Patent policy Patent pools Anticommons Double marginalization Complementary monopoly 

JEL Classification

L13 O31 O34 

Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  1. 1.Escuela de AdministraciónPontificia Universidad Católica de ChileSantiagoChile
  2. 2.Department of Economics and Economic HistoryUniversitat Autònoma de BarcelonaBellaterraSpain

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